Tag: Barack Obama

Rep. Hanna’s Corporate Tax Cut

Rep. Richard Hanna is one of the many new members of Congress with a no-nonsense business background. He is determined to move the GOP in the direction of major tax and spending reforms. When I chatted to the congressman, he told me that he had already read my Global Tax Revolution, so he will be well-armed in tackling business tax reform!

Hanna is off to a good start with his “American Competitiveness Act,” which would chop the federal corporate tax rate from 35 percent to 25 percent. He notes that “the average rate in the Organization for Economic Cooperation and Development countries is just over 25 percent, meaning the effective U.S. corporate tax burden, when state and local taxes are considered, can be 50 percent higher than some of our developed competitors, rendering our companies and workers less competitive.”

In his State of the Union address, President Obama said that he is willing to cut the corporate tax rate. So corporate tax reform could be the 2011 version of the Clinton-GOP welfare reforms of 1996. That is, a major pro-market success made possible by a liberal president moving to the pragmatic center.

Upcoming: On February 23, Cato will release new estimates of corporate “effective” tax rates by tax scholars Jack Mintz and Duanjie Chen. The study will shed further light on the dangerous uncompetitiveness of the U.S. corporate tax system.

On Not Leaving Iraq

The U.S. ambassador to Iraq expects to have 17,000 people on his staff after the United States “withdraws” from Iraq at the end of the year, he told the Senate this week. This is astounding. A typical American embassy in a small country might have 100 employees, in a big country such as Great Britain or Russia maybe a few hundred. A staff of 17,000 (including contractors) is not an embassy, it’s an occupation force. Or at least a viceroy’s staff. Here’s the Washington Post report:

The top U.S. diplomat in Iraq on Tuesday defended the size and cost of the State Department’s operations in that country, telling lawmakers that a significant diplomatic footprint will be necessary after the withdrawal of U.S. troops at the end of this year.

James F. Jeffrey, the U.S. ambassador in Iraq, told the Senate Foreign Relations Committee that his staff of 8,000 will grow in the coming year to about 17,000 people, the vast majority of whom will be contractors.

And while the State Department is spending about $2 billion annually on Iraq operations now, it plans to spend an additional $1 billion on the construction of facilities in each of the next several years….

We’re spending $2 billion a year now on State Department operations in Iraq alone, and we intend to spend $1 billion a year on construction for some years to come. That’s some withdrawal! I know that when Sen. Barack Obama asked to be entrusted with the presidency by repeatedly saying, “I will bring this war to an end in 2009. It is time to bring our troops home,” he only said “troops.” But I can’t believe that the voters who heard him anticipated leaving thousands of Americans and spending billions of dollars in Iraq for many years.

If members of Congress are looking for ways to cut a trillion-dollar deficit, they might look at our construction and employment and nation-building plans in Iraq.

Karl Rove’s Big-Government Myth

Karl Rove, the architect of Republican victories in 2000 and 2004 and Democratic victories in 2006 and 2008, denounces President Obama’s “spending binge” and “liberal activism” as described in the State of the Union address. The Wall Street Journal’s tagline on the column is, “On Tuesday, Republicans offered an alternative to the president’s big-government vision.” What Rove omits is that he and President Bush started the spending binge, delivered big government, and indeed came into office with a big-government vision, as Ed Crane pointed out in 1999.

Just take a look at the analysis in Rove’s Wall Street Journal column:

Most of his hour-long speech was a paean to liberal activism, as the president called for redoubling outlays on high-speed rail and “countless” green energy jobs.

Liberal boondogglery indeed. But Rove’s former colleague, White House speechwriter Michael Gerson, wrote on the same day in his Washington Post column:

 In his 2006 State of the Union address, which I helped write, President George W. Bush proposed a 22 percent increase in clean-energy research at the Energy Department, a doubling of basic research in the physical sciences and the training of 70,000 high school teachers to instruct Advanced Placement courses in math and science. I have no idea if these “investments” passed or made much difference. I doubt anyone knows.

Green nonsense is rampant in Washington.

Rove criticizes Obama for

a federal budget that’s increased 25% in two years, raising government’s share of GDP to 25% from roughly 20%.

Obama is a world-class spender. But spending increased 83 percent during Bush’s presidency, from $1.863 trillion to $3.414 trillion. He increased federal spending faster than any president since Lyndon Johnson. And yes, Obama is pushing the government’s share of GDP up; but Bush increased the federal government’s share of GDP by 2.2 percentage points, before the financial crisis, the bailouts, and TARP.

Rove writes:

The challenge is about more than budgets and debt. It is about government’s basic purposes and its role in our lives. If we don’t act soon, the nature of American society will change in deep, lasting ways.

Yes, that is the real problem. I have written critically of Obama’s “sweeping statist agenda.” But the Bush administration gave us stepped-up federal intrusions into our local schools, the biggest expansion of entitlements in 40 years, a proposed constitutional amendment to nationalize marriage law, unconstitutional restrictions on core political speech, intrusion of the federal government into Terri Schiavo’s hospital room, and, in the words of Gene Healy and Timothy Lynch,

a view of federal power that is astonishingly broad, a view that includes a federal government empowered to regulate core political speech — and restrict it greatly when it counts the most: in the days before a federal election;  a president who cannot be restrained, through validly enacted statutes, from pursuing any tactic he believes to be effective in the war on terror;  a president who has the inherent constitutional authority to designate American citizens suspected of terrorist activity as “enemy combatants,” strip them of any constitutional protection, and lock them up without charges for the duration of the war on terror — in other words, perhaps forever; and  a federal government with the power to supervise virtually every aspect of American life, from kindergarten, to marriage, to the grave.

Bush and Rove, too, changed American society in deep and lasting ways.

Rove writes that Paul Ryan, the new Republican chair of the House Budget Committee, “knows that reforming these programs, especially Medicare, is the only path to fiscal sanity and economic growth.” Too bad the Bush administration made the Medicare problem $18 trillion worse.

Rove writes that

the debate about the role and purpose of government has been joined in a way America hasn’t seen in three decades.

Let’s hope so. We at Cato have been trying to have that debate for years, including Ed Crane’s 1999 critique of the Bush-Rove big-government vision and Michael Tanner’s 2007 book, Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution. And certainly Rove’s comrade-in-arms Gerson has been vigorously arguing against the limited-government libertarian vision that opposes Bush-Obama statism.

Finally, Rove reminds us:

The total debt was $10.6 trillion before [Obama’s] inaugural and $14.2 trillion today.

True. President Obama is increasing deficits and debt even faster than President Bush, under whom the national debt rose by $4.9 trillion. But it takes a lot of chutzpah for the architect of the biggest debt increase ever to criticize the guy who comes along and tops the record.

Surely the Wall Street Journal can find more credible critics of President Obama’s big-government vision than people who ran the “big government disaster” that was the Bush administration.

Krugman (Both of Them) on Competitiveness

When it became clear that President Obama would make “competitiveness” a theme of his SOTU address, I looked forward to seeing Paul Krugman’s statement pointing out how much nonsense that is. Here he is, after all, in his excellent 1997 book, Pop Internationalism (MIT Press):

…International trade, unlike competition among businesses for a limited market, is not a zero-sum game in which one nation’s gain is another’s loss. It is [a] positive-sum game, which is why the word “competitiveness” can be dangerously misleading when applied to international trade.

Sure enough, President Obama’s speech last night was peppered with references to “the competition for jobs,” “new jobs and industries take root in this country, or somewhere else, “the competion for jobs is real,” etc. And of course there was a healthy dose of the usual mercantalist obsession with exports.

Although written before the President’s address was delivered, what would Paul Krugman 2.0 think of this sort of talk? The title of his column Sunday was certainly encouraging: “The Competition Myth.” But the substance of the column went in a … er… different direction from that which I had anticipated/hoped:

…talking about “competitiveness” as a goal is fundamentally misleading. At best, it’s a misdiagnosis of our problems. At worst, it could lead to policies based on the false idea that what’s good for corporations is good for America

So what does the administration’s embrace of the rhetoric of competitiveness mean for economic policy?

The favorable interpretation, as I said, is that it’s just packaging for an economic strategy centered on public investment, investment that’s actually about creating jobs now while promoting longer-term growth. The unfavorable interpretation is that Mr. Obama and his advisers really believe that the economy is ailing because they’ve been too tough on business, and that what America needs now is corporate tax cuts and across-the-board deregulation. [emphasis mine]

In other words, Krugman’s objections to the “competitiveness” rhetoric are based on his fear that it will lead to policies favorable to corporations, not that the whole concept is flawed.

[Disclaimer: the above is by no means an exhaustive analysis of the problematic parts of the column]

I yield to no-one in my admiration for Paul Krugman, trade economist. He made a real contribution to the discipline I’ve loved since I was a teenager. But Paul Krugman, columnist…not so much.

Is Obama Serious?

Today POLITICO Arena asks:

Although President Obama proposed a five-year, $40 billion per year freeze in non-security, discretionary spending, and Republicans want to cut spending by at least $100 billion a year, is either side serious about real spending cuts?

My response:

With uncontrolled deficits well into the future and a debt exceeding $14 trillion, for Obama to propose saving only $40 billion per year in discretionary spending over the next five years, while “investing” in pie-in-the-sky things like high-speed rail, wind farms, environmentally destructive ethanol, and the like, is worse than unserious – it’s an insult to our intelligence. Like Obama, many Republicans too treat military spending, among other things, as sacrosanct, but at least they’re proposing more serious budget cuts.

The deeper problem, of course, is systemic. Socialism, a large dose of which we have in America today, brings out the very worst in people. In the name of collective responsibility, it saps and then destroys individual responsibility, leading to a war of all against all. No one wants “his” entitlement cut for fear that his neighbor might profit at his expense – because, after all, “we’re all in this together.” Suspicion and envy are the order of the day. Meanwhile, dreamers like Obama (at least that’s his pose), who promote our collective drift, either can’t or won’t grasp the hard reality until it crashes down upon them, and us, as it is doing now in several of our states and in Europe. For the “hard-hearted” realists among us, November 2012 can’t come soon enough.

Cato Live Blog of President Obama’s 2011 State of the Union Address and GOP Response

Please join us at 9:00pm Eastern on Tuesday, January 25, 2011 for live commentary during President Obama’s State of the Union address and the response given by House Budget Chairman Paul Ryan (R-Wisc.). Here is our panel of expert bloggers (click each name for their respective Cato@Liberty archives):

Other Cato scholars may also be contributing.

Come back to this page at 9:00pm Eastern on Tuesday, January 25, 2011 to join us–we look forward to having you, and to sharing our insights with you.

Also, don’t forget to tune into our Facebook page immediately following this live blogging event for live video reaction to the speeches from Vice President Gene Healy and Research Fellow Julian Sanchez.